This week, I read an article on creditslips.org by Pamela Foohey who is a professor of law at Indiana University Maurer School of Law. The article discusses an upcoming law review article in the Notre Dame Law Review, Life in the Sweatbox, about the struggles consumers endure before filing bankruptcy.
What Is The Sweatbox?
The “Sweatbox” is defined as the financial sweatbox, or time before a person files bankruptcy. The article focuses on how long people are living in the so-called sweatbox, what they endure while they are living in it and the research confirms that people don’t file bankruptcy out of convenience.
Time in the sweatbox consists of the time when a consumer defaults on a debt or is about to default on a debt. It is during this time that lenders make debt collection calls, charge high interest rates and fees, and consumers often choose to live without the necessities of food, utilities and medical care in order to meet obligations. It is also during this time that consumers often liquidate or lose what little assets they own. Homes are lost to foreclosure, vehicles are lost to repossession, retirement accounts are cashed out to pay debts, and consumers will often sell personal property items such as jewelry, firearms, furniture, electronics, tools, etc. to pay bills.
Consumers appear to delay filing a bankruptcy for as much as up to 2 years. The article points out, “And although long strugglers do not file bankruptcy until long after the benefits outweigh the costs, they still report being ashamed of needing to file.” The guilt and stigma associated with filing a bankruptcy causes many people to delay filing, and they lose personal items that they may be able to protect if they would not delay and just file. Keeping those exempt assets and not liquidating everything leaves a cushion or something from which to re-build after filing the bankruptcy.
Getting Out of the Sweatbox
Each and every day I talk with potential clients who are overwhelmed, tired, drained and embarrassed to be here. The reality is that I cannot think of a single person who set out years in advance to incur debt just so they can reap the benefits of the debt and turn around and file bankruptcy to resolve them of that debt. It just doesn’t happen. The people I counsel have had a job loss, divorce, major medical event or significant change in expenses. Bankruptcy may not be the right answer, but you don’t know unless you talk with an informed attorney.
Heather Ellis Banks is an Associate Attorney at the Bond & Botes Law Offices in Knoxville, Tennessee. She holds a Bachelor of Science from the University of Tennessee Knoxville, and a Juris Doctorate from the University of Memphis, Cecil.C. Humphreys School of Law. She has been helping consumers to navigate through the bankruptcy process since 2005. Read her full bio here.